tag:blogger.com,1999:blog-8278279504304651957.post6132959405129933791..comments2019-01-21T10:41:31.932-08:00Comments on South Asia Investor Review: How Pakistan's Corrupt Elite Use Trade Misinvoicing to Launder MoneyRiaz Haqhttp://www.blogger.com/profile/00522781692886598586noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-8278279504304651957.post-43267198835790530702018-06-21T07:06:59.135-07:002018-06-21T07:06:59.135-07:00Panama Papers: New leak shows Pak clients struggli...Panama Papers: New leak shows Pak clients struggling to avoid trouble<br /><br />https://www.thenews.com.pk/print/331641-panama-papers-new-leak-shows-pak-clients-struggling-to-avoid-trouble<br /><br />A fresh batch of leaked documents of Panamanian law firm, Mossack Fonseca, reveals how panic triggered after the release of Panama Papers among the firm and its clients; several of them were Pakistanis who had to change their plans of hiding wealth abroad amid fear of yet another leak.<br /><br />A person (Zaka Ashraf) nominated by PPP for interim PM, who had also been chairman of the Pakistan Cricket Board (PCB), abandoned the process of opening two accounts in Swiss banks after the Panama Papers through his two benami shell companies which came to surface earlier but their ownership was unknown.<br /><br />Former attorney general Justice (R) Malik Qayyum disassociated himself from a benami company. Its Swiss bank account had Qayyum and his wife as signatories. Samina Durrani, the mother of Tehmina Durrani, “gifted” one offshore company holding property in the UK, to Asimullah Durrani, her son, a few months after the release of Panama Papers.<br /><br />Meanwhile, a Pakistani banker in the Middle East, Saleem Sheikh, was found seeking explanation from the law firm about the steps taken to prevent any embarrassment in future through yet another leak.<br /><br />Instead of replying to this concern, Mossack Fonseca served him notice in April 2017 together with other Pakistani passport holders having companies in British Virgin Islands to change their registered agent as “an administrative decision has been taken to resign as registered agent/office for companies with links to high risk countries.” Pakistan is among those 21 countries declared prohibited for business by BVI in April 2017. Nielsen and Nescoll, the offshore companies owned by Sharif family had changed their agent in 2014 hence no detail was found in the latest leak.<br /><br /><br />-----------------<br /><br />Although Mossack Fonseca announced its closure in March this year, it started resigning in April as registered agent of clients from Pakistan which is “on our current prohibited list of countries.” “Kindly however advise the client that an administrative decision was made after conducting a risk assessment to cease acting as agent for companies associated with Pakistan currently, due to the elevated country risk. “Accordingly, we suggest that they make arrangements to change the registered agent/office of the company soonest,” read an email.<br /><br />There are another 20 countries which have been declared ‘High Risk’ due to money laundering and terror financing. Pakistan has been flagged due to terror financing. Other high risk countries are Afghanistan, Belarus, Bosnia, Central African Republic, Cuba, Congo, Eretria, Iran, Iraq, Lebanon, Libya, North Korea, Serbia, Sierra Leone, Somalia, South Sudan, Sudan, Syria, Yemen and Zimbabwe.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-8278279504304651957.post-75807838575418537452018-05-15T21:37:13.322-07:002018-05-15T21:37:13.322-07:00#British National #Crime Agency (NCA) warns that #...#British National #Crime Agency (NCA) warns that #UK remains prime destination for foreign corrupt person and politicians and their families to launder money, with biggest sources of #corrupt investment being #Russia, #Nigeria, #Pakistan. #MoneyLaundering<br /><br />https://www.theguardian.com/uk-news/2018/may/14/uk-businesses-warned-risk-brexit-driven-crime-surge-national-crime-agency<br /><br />British businesses are at risk of being drawn into corrupt practices after the UK leaves the European Union in a Brexit-driven surge in crime, law enforcement officials have warned.<br /><br />UK-based companies looking to increase trade with countries outside the EU are more likely to come into contact with corrupt markets, particularly in the developing world, the National Crime Agency (NCA) said.<br /><br />Brexit will also provide greater opportunities for criminals to launder money, such as investing dirty cash in British businesses that deal in high-value items such as gems and precious metals, the agency said.<br /><br />In its annual assessment of serious and organised crime, the NCA said criminals would take advantage of a redesigned customs setup when the UK leaves the EU, as well as any gaps in intelligence-sharing between countries, which could lead to international fugitives evading capture.<br /><br />“As the UK moves towards exiting the EU in March 2019, UK-based businesses may look to increase the amount of trade they have with non-EU countries,” the report said. “We judge this will increase the likelihood that UK businesses will come into contact with corrupt markets, particularly in the developing world, raising the risk they will be drawn into corrupt practices.”<br /><br />The NCA said the result of the EU referendum would be “a key driver of uncertainty” in the next five years.<br /><br /><br />Sign up to our Brexit weekly briefing<br /> Read more<br />Nikki Holland, the director of investigations for the National Crime Agency, said: “We know the criminals will adapt to what the arrangements are and exploit any loopholes. We think while there is uncertainty … the criminals will be waiting to see what the opportunities and loopholes are, to get their goods across the border during any confusion.”<br /><br />As well as the NCA, police forces, MI5, MI6, GCHQ, the Border Force, immigration enforcement and the Prison Service all contributed to the assessment.<br /><br />Law enforcement agencies, including the NCA, have previously warned of the risks to intelligence sharing posed by the vote to leave the EU.<br /><br />Lynne Owens, the NCA director general, has , including use of the European arrest warrant and membership of Europol, amid concerns about the impact of leaving the EU.<br /><br /><br />Membership of the EU gives the NCA and UK police forces access to tools that allow them to share intelligence quickly and efficiently with European counterparts.<br /><br />Before the referendum, former security chiefs, including the former head of MI5 Eliza Manningham-Buller and the former head of MI6 Sir John Sawers, had said that voting remain was in the best interests of the country’s security.<br /><br />Elsewhere in the report, the NCA warned that the UK remained a prime destination for foreign corrupt and politically exposed people to launder money, with the biggest sources of corrupt investment being Russia, Nigeria and Pakistan.<br /><br />“Investment in UK property, particularly in London, continues to be an attractive mechanism to launder funds,” the report said.<br /><br />The NCA said that the scale of money laundering in the UK annually is in the billions of pounds.<br /><br />The agency also flagged an increase in criminal gunfire on the streets of Britain. The report said the majority of weapons had not been previously used, which suggested an easy flow of illegal weapons into the UK.<br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-8278279504304651957.post-31757327899566740192018-05-15T21:20:34.905-07:002018-05-15T21:20:34.905-07:00Electronic data exchange between #China and #Pakis...Electronic data exchange between #China and #Pakistan to go live soon to deal with huge discrepancy in #trade figures ($12 billion imports in Pakistan vs $16 billion exports from China in 2017), excise #tax evasion and #MoneyLaundering. #misinvoicing<br /><br />https://www.thenews.com.pk/print/317155-electronic-data-exchange-with-china-to-go-live-soon<br /><br />Pakistan is on the verge of launching electronic origin data exchange, which would enable real time recording of trade between the two countries and help curb revenue evasion as well as money laundering, an official said.<br /><br />Directorate General of Reforms &amp; Automation – Customs has developed the software in this regard and user acceptance testing by Trade Development Authority of Pakistan (TDAP) has also been concluded.<br /><br />“Presently, the testing of electronic message exchange through the software is in progress between the technical teams of China and Pakistan,” the official said.<br /><br />The official added that the system, being developed under China-Pakistan free trade agreement (FTA), would be available for live data exchange after the completion of testing.<br /><br />Imports from China constitute a significant part of Pakistan’s total imports, which opened doors for under-invoicing aimed at revenue evasion as well as over-invoicing aimed at moving out foreign exchange in an organized manner.<br /><br />Finance Minister Miftah Ismail, in a recent interaction with newsmen, had said the government had detected mass under-invoicing on imports from China. The premier had also said the record at Pakistan Customs reported imports of $12 billion from China last year, while data at Chinese Customs reported exports of $16 billion to Pakistan during the same period.<br /><br />A trader, requesting anonymity, said under-invoicing and revenue evasion was only a part of the damage, China-Pakistan FTA dealt to the local industry and economy.<br /><br />Quite recently, Pakistan Customs detected large scale money laundering through gross over invoicing of solar PV panels imported from China, and advocated concerted efforts involving State Bank of Pakistan (SBP) and by extension commercial banks.<br /><br />Earlier in June last year, Pakistan Solar Association (PSA) in their representation to Customs authorities had shared actionable information regarding money laundering through over-invoicing of solar (photovoltaic) panels and requested investigation into the matter. The investigations had revealed the said goods were being imported into the country from China at double the international market rates.<br /><br />The official further said the implementation of electronic data exchange between China and Pakistan under Pak China FTA would facilitate trade and help combating commercial frauds.<br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-8278279504304651957.post-33752858733489080842018-05-02T15:16:25.107-07:002018-05-02T15:16:25.107-07:00With new order on unexplained wealth, UK can seize...With new order on unexplained wealth, UK can seize assets of corrupt politicians, criminals<br />Property in London and other major cities in the United Kingdom is said to be the major destination of corrupt cash.<br /><br />https://www.hindustantimes.com/world-news/with-new-order-on-unexplained-wealth-uk-can-seize-assets-of-corrupt-politicians-criminals/story-8lDQIbyB1kvGsBUzJIjtaP.html<br /><br />Corrupt foreign politicians and criminals who launder an estimated £90 billion every year through the United Kingdom will need to explain their wealth under a new law called Unexplained Wealth Order (UWO) that came into force this week, or face seizure.<br /><br />Property in London and other major cities in the United Kingdom is said to be the major destination of corrupt cash. The British news media mention Russian oligarchs in this regard, but the measure applies toindividuals from all countries.<br /><br />Transparency International UK has identified £4.4 billion worth of property in the UK that may be the target of UWOs. Five properties it suspects had been bought using corrupt wealth includes two by former Pakistan prime minister Nawaz Sharif in London.<br /><br />Provided under the Criminal Finance Act, the UWO allows authorities to freeze and recover property if individuals are unable to explain how they acquired assets in excess of £50,000. Previously, British authorities had few powers to act unless the individuals had a conviction in the country of origin.<br /><br /><br />Ben Wallace, security minister, told The Times on Saturday that he wanted the “full force of the government” to bear down on criminals and corrupt politicians using Britain as a playground and haven: “When we get to you we will come for you, for your assets and we will make the environment that you live in difficult”.<br /><br />“If they are an MP in a country where they don’t receive a big salary but suddenly they have a nice Knightsbridge townhouse worth millions and they can’t prove how they paid for it, we will seize that asset, we will dispose of it and we will use the proceeds to fund our law enforcement,” he added.<br /><br />Rachel Davies Teka of anti-corruption Transparency International UK, said: “The introduction of UWOs is a significant moment in the fight against dirty money flowing into the UK. They will allow law enforcement to much more easily investigate assets that are highly likely to have been bought using corrupt money, often stolen from populations in some of the poorest parts of the world.”<br /><br />“From Russia to Nigeria to the Middle East it is no secret that corrupt officials have channelled ill-gotten funds into the UK via the property market”.<br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-8278279504304651957.post-18633388821196087042018-05-01T21:38:27.609-07:002018-05-01T21:38:27.609-07:00GFI on Trade Misinvoicing:
http://www.gfintegrit...GFI on Trade Misinvoicing:<br /><br /><br />http://www.gfintegrity.org/solutionsforinspiredeconomies/<br /><br />Trade misinvoicing has impacted emerging market and developing countries for decades by siphoning capital out of economies and denying governments vitally important domestic resources. This phenomenon is utilized for the purpose of 1) manipulating VAT taxes, customs duties, income taxes and other sources of revenue for Governments, and 2) shifting money into or out of countries in a manner that cannot be easily detected.<br /><br />This reality may be manifested through:<br /><br />Import Over-Invoicing<br />Import Under-Invoicing<br />Export Under-Invoicing<br />Export Over-Invoicing<br /><br />The drainage of money out and the loss of revenue in emerging market and developing countries is in the hundreds of billions of dollars annually.<br /><br />Solutions for Inspired Economies is a three-part program addressing this reality. Each part may be undertaken individually, or simultaneously, or in any order. The three components are:<br /><br />Economic Analysis<br />Policy Dialogue<br />GFTrade Global Trade Pricing Database<br /><br />The following materials present details on each of these components of the Solutions for Inspired Economies package.<br /><br /><br />Economic AnalysisPolicy DialogueGFTrade<br />Economic Analysis<br />Global Financial Integrity (GFI), with years of experience analyzing trade data, undertakes an in-depth analysis of a country’s misinvoicing problem. Data is drawn from two sources:<br /><br />International Monetary Fund Direction of Trade Statistics<br />United Nations Commodity Trade Statistics Database<br /><br />IMF Direction of Trade Statistics (DOTS) presents data on a country’s bilateral trade with its trading partner countries. With this data source GFI is able to appraise the magnitude of trade misinvoicing impacting a country and in many cases detect with which trading partner countries misinvoicing is most frequently evidenced.<br /><br />UN Commodity Trade Statistics Database (UN Comtrade) presents bilateral trade data by country and by Harmonized System commodity code identification, enabling further examination of bilateral trade discrepancies and scrutiny of which commodity groups reveal misinvoicing most frequently.<br /><br />Utilizing these two sources of data, GFI produces a thorough analysis of the magnitude of a country’s misinvoicing problem. We can determine how much of the problem stems from import over- or under-invoicing or export under- or over-invoicing. With a sufficiently long time series of data, we are often able to measure how economic and political events have influenced misinvoicing. Across shorter time periods we can estimate what revenues have been lost to Governments. And we are often able to measure the relationship of illicit financial flows through trade misinvoicing to other factors such as foreign direct investment, tax policy, social expenditures, and inequality.<br /><br />The Economic Analysis provides a useful first step in determining how a country may progress in curtailing its trade misinvoicing problem.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-8278279504304651957.post-68470617761738339312018-05-01T21:15:11.310-07:002018-05-01T21:15:11.310-07:00Pak China under-invoicing
https://www.brecorder.c...Pak China under-invoicing<br /><br />https://www.brecorder.com/2018/03/12/404239/pak-china-under-invoicing/<br /><br />About a decade ago, it was proposed that Pakistan Customs be linked with China Custom to curb or at least minimize under-invoicing. Intermittently, there have been reports about progress towards the establishment of an Electronic Data Interchange System (EDIS) but nothing appears to have materialized until now. This month the deadline of April 30 was set for Pakistan and China to exchange trade data digitally.<br /><br />Yes, the discrepancies of Pakistan China trade have undoubtedly raised many red flags. While many problems plague Pakistan’s current account that would require extensive re-hauling of the economy in the long term to fix, this is a problem that can be addressed in the short term and can save the economy billions.<br /><br />One estimate suspects under-invoicing to have crossed the Rs.300 billion in 2010 on imports from China. A relatively simplified but pertinent estimation of Pakistan-China trade by PBC placed the discrepancy at $3.5 billion for 2016.<br /><br />But as laudable as this measure is, assuming that its implemented timely and not left to languish for another decade, it has a number of caveats attached. Pak-China trade is not the only bilateral trade prone to under-invoicing nor is the official channel of formal trade the only avenue for nefarious activities.<br /><br />A study published in 2016 by the Lahore Journal of Economics estimated more than $92.7 billion in losses from 1972 to 2013 for 52 major traded commodities for trade with 21 partners due to mis-invoicing. The gross revenue loss to the national exchequer was placed at $21.1 billion while loss of revenue in the form of custom duties evasion and export withholding tax was at $11 billion. The annual average net revenue loss due to it was roughly equal to 11.2 percent of revenue from tariffs. While trade with China was identified as one of the main culprits, it is by no means the only one.<br /><br />A PBC study on under-invoicing from UAE lists a range of goods from mineral and chemicals to dyes, cosmetics and textiles on which disparities were observed. As per the study, Pakistan loses about Rs.150 billion each year to under-invoicing which is part of the Rs.600 billion lost each year due to smuggling and misuse of concessionary duties.<br /><br />Among other countries, a cursory comparison between ITC data and SBP data for Pakistan’s trade with USA, Japan, and Indonesia lead to a discrepancy of nearly Rs.1.9 billion.<br /><br />APTTA is another channel that is in a league of its own. In 2015, 9 out of the top 10 products imported through APTTA were recorded at values significantly higher reported exports by partner countries. The value of these discrepancies of the top 10 products alone was $1.4 billion that is nearly 60 percent of APTTA’s $3.18 billion trade (as per statistics reported by PBC based on Pakistan Customs data).<br /><br />By its very nature, it is hard if not impossible to gauge the actual extent of illicit trade activities. The estimates however provide a rough guideline as to the scale of problem faced by the country. One hopes that EDIS would be implemented this time and not left to dwindle away in talks. One also hopes that this is seen as a step in the right direction, the first of many, which need to be taken to fix the chronic problems of trade figures’ disparities.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-8278279504304651957.post-77891443946098350362018-05-01T19:49:15.069-07:002018-05-01T19:49:15.069-07:00The Magnitude of Trade Misinvoicing and Resulting
...<br />The Magnitude of Trade Misinvoicing and Resulting<br />Revenue Loss in Pakistan<br />Tehseen Ahmed Qureshi* and Zafar Mahmood**<br /><br /><br />http://www.lahoreschoolofeconomics.edu.pk/EconomicsJournal/Journals/Volume%2021/Issue%202/01%20Qureshi%20and%20Mahmood.pdf<br /><br />Abstract<br />This study estimates the magnitude of trade misinvoicing in Pakistan with<br />21 of its developed trading partners in 52 major traded commodities during 1972–<br />2013. We find that the total volume of trade misinvoicing for this period exceeds<br />US$92.7 billion. The gross revenue loss borne by the national exchequer due to<br />trade misinvoicing is estimated at US$21.2 billion. Moreover, the total net revenue<br />loss is an estimated US$11 billion in the form of evasion of customs duties and<br />export withholding tax. The annual average net revenue loss due to trade<br />misinvoicing is almost equivalent to 11.2 percent of the total revenue generated<br />from customs tariffs. We also find that customs tariffs and the interest rate are<br />positively associated with import under-invoicing, while improvements in the<br />current account balance and political stability reduce the extent of import overinvoicing.<br />Capital account openness is found to be insignificant in determining<br />trade misinvoicing.<br /><br />-------------<br /><br /><br />Kar and Spanjers (2015) estimate that the sum of total trade<br />misinvoicing in 2013 in developing countries was US$1.1 trillion. The total<br />trade misinvoiced during 2004–13 is estimated to be around US$7.8 trillion<br />for 55 developing countries. Furthermore, trade misinvoicing accounts for<br />83 percent of the total illicit trade in developing countries. This implies that<br />illegal financial flows resulting from trade misinvoicing have a<br />considerable damaging impact on developing economies (Kar, 2010).<br />Kar and Spanjers (2015) also point out that, in the Global South,<br />trade misinvoicing has increased over time. Trade misinvoicing in<br />emerging countries is increasing on average at 6.5 percent per annum.<br />The total trade misinvoiced in Asia accounts for 38.8 percent of total trade<br />misinvoicing in emerging countries. It also has the highest annual growth<br />rate of trade misinvoicing at 8.6 percent. The top exporters of illegal<br />capital are Asian countries, including Malaysia, China, India, the<br />Philippines, Indonesia and Thailand. Russia is the main source of trade<br />misinvoicing in Europe. Illicit flows from the West are generated<br />primarily by Mexico and Brazil.<br />The first study to estimate illegal flows of capital from developing<br />countries due to trade misinvoicing was carried out by Bhagwati (1964). He<br />compares the bilateral trade data for Turkey with that of its trading<br />partners. He accounts for the discrepancies between the trade figures of the<br />partner countries by indicating that either of the two or both had exploited<br />their trade invoices to move capital. Given that the customs administration<br />in advanced countries is more likely to be simpler, transparent and<br />accountable relative to developing countries, we can assume that the data<br />for developed countries is more reliable for comparison purposes<br />(Bhagwati &amp; Hansen, 1973).<br />Historically, Pakistan has maintained very high tariff rates and<br />relied on nontariff barriers (NTBs) to protect domestic industries from <br />The Magnitude of Trade Misinvoicing and Resulting Revenue Loss in Pakistan 3<br />foreign competition. Both tariffs and NTBs are seen as major reasons for<br />import under-invoicing. Pakistan has also offered many incentives to<br />promote export-oriented industrialization. While these incentives have<br />helped the country maintain a reasonable rate of export growth, many<br />exporters have also manipulated them to their advantage by engaging in<br />unfair and illegal practices. Such practices cause not only financial losses to<br />the exchequer, but also undermine the very objective of these policies.<br />Consequently, exporters who do not engage in such malpractices are<br />subject to large losses because their bargaining position in the market tends<br />to weaken (Mahmood &amp; Mahmood, 1993)Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.com